Cost of housing in Canada

[Brad Sallows]

This - so many forget that along with their house going up so is everyone's else. At least until the try to sell to upgrade to a new place they liked and realize it is now out of their range.

Most people downsize with advancing age.

The "home ownership rate" - whatever is encompassed by that measure - typically lies between 65% and 70%, and it's on the low side right now. A few bits and pieces here.

"The portion of Canadians living in owner-occupied homes is higher now than it was in the early eighties. In 1981, 62.1% of Canadians lived in their own home. In 1990, the portion was up slightly, at 62.6%.

At the start of the new millennium, the portion of homeowners in Canada had risen to 65.4% and continued to rise, reaching the highest peak in 2014 when homeownership was 69.5%. It has since fallen to 66.5% according to the 2021 census, the lowest rate since 2002."

 

[Brad Sallows]

I am willing to sacrifice my potential ‘gains’ for everyones benefits.

I could stand the "pain" also.

What motivates people to start voting for governments with fiscally and economically favourable policies, though, if they never have to feel the consequences of voting otherwise? What motivated people to vote for a change of government in 2015? It was not reasonable to expect there would be no cost to voting to seat a party openly promising to unbalance budgets and with stated intentions that were antithetical to economic growth.

There is not really any method to predict exactly where (on whom, and how, and when) the costs of governmental profligacy will land; all that can be certain is that there will be costs.

 

[CountDC]

Most people downsize with advancing age.

With advance age and family moving out yes but there are those on the other end that bought a small home they could afford and then with the increase in value along with addition of kids want to move to the bigger house they liked but couldn't afford at that time. There have been a few stories in the news on the housing market that mentions some thinking of or putting their house on the market intending to move up only to pull it back when they find out how much it will cost them as that house has also increased at the same rate. I especially remember one where the woman was bemoaning how unfair it was and the government should do something about it as it struck me ironic that she had no issue with her property increasing so much but felt it was unfair the new one she wanted had.

 

[IKnowNothing]

60-69 year olds who still had mortgage averaged 256k on that with a total debt average of 436k.

70+ year olds, 11% still carry a mortgage and that mortgage balance averaged 217k. 15% of 70+ carry a Heloc owing a average of 124k.

Thats a decent proportion of boomers. Not to mention it’s about a 75% home ownership rate for those age groups so 25% don’t have a home and likely aren’t in a position to be offering much. So out of that 75% only about 66% have a paid off home, and only about 60% have no debt tied into that.

You're underestimating how low that debt load is to the value of the home, as well as how just how many homes those "only" represent. That's a lot of equity value left to transfer- or a home with a very reasonable mortgage - IF the family has their shit together in terms of estate planning.

I'm not advocating that prices being where they are is a "good" thing for society, I'm just pointing out how they are being sustained in the face of "in a vacuum type affordability analyses" that say the current market shouldn't be viable, why there's a good chance that nothing is "going to give" in the short term -and if it doesn't- how families can adjust to this reality. For all the hardship people are facing right now, the reality is that the system is far more resilient than how it seems looking at the perspective of a 1st time homebuyer going it alone.

Kirkhill said it perfecty-

We all live in the world in which we find ourselves.

People adapted to the COVID price shock
People adapted to the post COVID interest rate shock.
Some families are adapting to support each other and navigate this market.


Barring a devastating systemic collapse the way to keep the housing wealth from concentrating into fewer and fewer hands is for more and more people to adapt.

That being said- a further haircut to early 2020 prices followed by a decade of nice stable 2% increases would be nice.

 

[Brad Sallows]

With advance age and family moving out yes but there are those on the other end that bought a small home they could afford and then with the increase in value along with addition of kids want to move to the bigger house they liked but couldn't afford at that time. There have been a few stories in the news on the housing market that mentions some thinking of or putting their house on the market intending to move up only to pull it back when they find out how much it will cost them as that house has also increased at the same rate. I especially remember one where the woman was bemoaning how unfair it was and the government should do something about it as it struck me ironic that she had no issue with her property increasing so much but felt it was unfair the new one she wanted had.

By my experience, 1200 square feet is enough for a family of 5.

 

[Cloud Cover]

I guess the other thing about high housing prices and real estate value, is the resulting property tax bill, the rising costs of utilities, infrastructure, and home upkeep costs. Even if a family owns their home outright, the mandatory and necessary cost of occupying and owning is significant. It’s a tribute to Canadian wealth generation and work ethic that people can afford all of that, plus a mortgage, plus transportation, life/living costs. And dare I say it… still be able to afford a decent bottle every now and again.

 

[Cloud Cover]

By my experience, 1200 square feet is enough for a family of 5.

Sounds about right.

 

[Eaglelord17]

The other major thing to consider with increased home prices is it results in a lot of other increases. We still haven’t seen this fully come to fruition yet as the re-assessments won’t have happened to everyone yet.

Increased insurance because your home is more expensive to replace. Increased property taxes as its based off the value of your home. Increased interest paid to the bank, over the course of a 25 year mortgage its roughly double the cost of the home, if the house is now 1 million instead of 500k, your paying 1 million in interest (so 2 million in total which also happens to be more money than most make working in 40 years after taxes). Increased realtor fees (6% of the value usually). Increased land transfer tax, etc.

It’s a race to the bottom for one of the most basic necessities of life.

 

[Furniture]

The other major thing to consider with increased home prices is it results in a lot of other increases. We still haven’t seen this fully come to fruition yet as the re-assessments won’t have happened to everyone yet.

Increased insurance because your home is more expensive to replace. Increased property taxes as its based off the value of your home. Increased interest paid to the bank, over the course of a 25 year mortgage its roughly double the cost of the home, if the house is now 1 million instead of 500k, your paying 1 million in interest (so 2 million in total which also happens to be more money than most make working in 40 years after taxes). Increased realtor fees (6% of the value usually). Increased land transfer tax, etc.

It’s a race to the bottom for one of the most basic necessities of life.

Yeah... but people that already own are good, so no big deal.

/s

 

[Remius]

Yeah... but people that already own are good, so no big deal.

/s

Would you happen to know what the percentage of that would be?

 

[IKnowNothing]

The other major thing to consider with increased home prices is it results in a lot of other increases. We still haven’t seen this fully come to fruition yet as the re-assessments won’t have happened to everyone yet.

Increased insurance because your home is more expensive to replace. Increased property taxes as its based off the value of your home. Increased interest paid to the bank, over the course of a 25 year mortgage its roughly double the cost of the home, if the house is now 1 million instead of 500k, your paying 1 million in interest (so 2 million in total which also happens to be more money than most make working in 40 years after taxes). Increased realtor fees (6% of the value usually). Increased land transfer tax, etc.

It’s a race to the bottom for one of the most basic necessities of life.

Interest yes. Insurance is based on replacement build value- not market value. Tax varies by province, and even municipality. Some tax assessments are market based, others based on a policy formula- and at least in Ontario, a general x% increase in assessed value across all homes is not going to result in an x% increase in property tax, unless the municipality can justify why it needs x% more tax revenue. Ontario tax bills are going to up, but with significant lag and not proportionally.

 

[IKnowNothing]

Yeah... but people that already own are good, so no big deal.

/s

It's not that it's "no big deal"

It's that a quiet majority are in a situation where they can prop up/ act within the market as it is despite the the very real issue, and as such:

• the wait for "something that has to give" with respect to the market correcting itself might/will likely be a long one
• policy solutions to the very real issue will need to avoid measures that are punitive or overly detrimental to homeowners, or they will be DOA due to electoral reality/ people voting in their best interest

 

[Kirkhill]

Hands up all those whose kids are still living under their roof because they can't afford rent or mortgage.

If you are going to have to share a house or an apartment then you might as well share it with family.

 

[rmc_wannabe]

Hands up all those whose kids are still living under their roof because they can't afford rent or mortgage.

If you are going to have to share a house or an apartment then you might as well share it with family.

I have every belief that my kids will be with me until they're in their 30s. And that's ok.

The "out at 18" is very much a North American narrative that didnt exist pre-1950s. My cousin in Italy just left home.. at the age of 33.

 

[Kirkhill]

I have every belief that my kids will be with me until they're in their 30s. And that's ok.

The "out at 18" is very much a North American narrative that didnt exist pre-1950s. My cousin in Italy just left home.. at the age of 33.

Not a North American narrative. It was also the standard in Britain.

 

[CountDC]

By my experience, 1200 square feet is enough for a family of 5.

You don't have my family

Does that account for pets and the teen mentality where by each needs their own massive room, walk in closet and bathroom (no mine didn't get that but they would like to)?

I fully agree that there is a big difference in many cases between need and want with may desiring that big house/mansion for the social status.

 

[Brad Sallows]

I have every belief that my kids will be with me until they're in their 30s. And that's ok.

The "out at 18" is very much a North American narrative that didnt exist pre-1950s. My cousin in Italy just left home.. at the age of 33.

True. Before then it was "out at 15-18". A good age to sign on to a freighter bound for the far east.

 

[Brad Sallows]

I fully agree that there is a big difference in many cases between need and want with may desiring that big house/mansion for the social status.

Size, features, and complexity of build are factors often ignored when making the simple "house cost then, house cost now" comparisons. But the chief factor is still the plain land cost.

 

[Kirkhill]

True. Before then it was "out at 15-18". A good age to sign on to a freighter bound for the far east.

My parents left school at age 15 and went on to trades training and apprenticeships.

 

[Kirkhill]

Size, features, and complexity of build are factors often ignored when making the simple "house cost then, house cost now" comparisons. But the chief factor is still the plain land cost.

The houses have become larger with fancier trim and more gingerbread to justify the increased price of the land. Hard to sell an 800 sq ft wartime on a $2,000,000 lot.

In fact most developers won't let you build a small house.